Category: Critique of Mainstream Economics

Rethinking the Law and Economics Paradigm

mohamedobaidy3 Comments

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鈥�As a step toward that ideal it seems to me that every lawyer ought to seek an understanding of economics. The present divorce between the schools of political economy and law seems to me an evidence of how much progress in philosophical study still remains to be made. In the present state of political economy indeed, we come again upon history on a larger scale, but there we are called on to consider and weight the ends of legislation, the means of attaining them, and the cost.鈥� (Oliver Wendell Holmes; 1897) [1]

The World Bank鈥檚 policy focus shifted in the 1990s from a market-oriented paradigm to other issues such as social justice, poverty reduction and 鈥渕arket failures鈥�, where institutions had to play a greater role [2]. Known as the Post-Washington Consensus or the Third Moment in Law and Development, this new paradigm emphasizes the importance of 鈥済ood governance鈥�, the implementation of property rights for economic growth, and makes the following proposition: well-defined and formalized property rights lead to market efficiency, economic growth and development. Hence, since then the establishment of the 鈥渞ule of law鈥� has become the new goal to reach for developing countries.

However, this Law and Economics paradigm relies on a narrow set of theoretical assumptions and is heavily influenced by neoclassical views of the state, the market and overall competition. But this framework raises some questions: (a) are these assumptions empirically valid, namely is the implementation of property rights a necessary condition for economic growth and development? And (b) are 鈥減erfect competition鈥� and 鈥渕arket failures鈥� reliable concepts one should start from to cope with development 鈥� if by such term we mean a social and economic process that will ultimately increase human well being?Read More »

Africa: Why Western Economists Get It Wrong

grievechelwa2 Comments

2-3-_unpacking_african_numbers_10070552376Morten Jerven, image via Wikimedia

Development economics as a field of study was formally launched in the 1950s by the Afro-Caribbean economist who, out of necessity, wanted to understand how his own country, Saint Lucia, could transform from an agro-based economy into a modern industrial state (later, in 1979, Lewis was awarded the for this work, the only black person to have won the prize to date). For Lewis, the key to providing a satisfactory answer to the problem of underdevelopment lay in studying those societies as they were and not in comparing them to some mythical ideal. Saint Lucia, like all developing countries, had a lot of underemployed labor in its agricultural sector. The question was how best to marshal this valuable resource into driving industrialization.

Sadly, development economics has moved away from Lewis鈥� pioneering contribution of studying poor countries on their own terms. For example, today鈥檚 development economists explain Tanzania鈥檚 lack of development as stemming from its inability to be more like Sweden. This way of studying development, termed the 鈥渟ubtraction approach鈥�, has led us down a dark alleyway where there is more confusion than elucidation. That, at least, is the charge leveled by economic historian in his book published in 2015, but still circulating and prompting debate in academia and amongst practitioners.

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Is Development Possible In Capitalism?

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By Douglas McDonald [re-blog from ]

Last Friday was the Debating Development conference, organized by the titular scholars of , a group coordinated by NSSR鈥檚 own Ingrid Kvangraven. The conference put many scholars of different regions and different theoretical perspectives in conversation. Although it was titled 鈥渄ebating development,鈥� as NSSR economics professor Sanjay Reddy noted in his opening remarks, most of the perspectives presented were more intersecting than mutually exclusive, so the conference could also be understood as a means to compound or complexify perspectives, rather than adopt or discard them.

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How to Justify Teaching the Worst of Economics to Non-Economists

Ingrid Harvold Kvangraven6 Comments

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By Ingrid Harvold Kvangraven

Being an Economics PhD student in a gives me the privilege of taking courses in a range of different schools of thought within the discipline. In the Economics department, most of us take the stance that it is imperative to understand the mainstream in order to criticize them effectively. We go to great lengths to learn about the nuances of Neo-classical Economics, general equilibrium theory, and New-Keynesian Economics. Meanwhile, we also have full courses devoted to non-mainstream approaches, such as Post-Keynesian and Marxian Economics. We are aware of the ideological underpinnings of a lot of mainstream theory, and many of us see this as a motivation to challenge the discipline.

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